Why we should care about BAT’s expanding empire in China

Recently, a dispute surrounding data sharing between Alibaba, the largest e-commerce giant in China, and SF Express, a delivery services company that is one of the two leading couriers in China, and also a logistics partner of Alibaba, has drawn people’s attention. Given this present focus on the changing relationship between Alibaba and SF Express, it is time to call attention to how BAT, which is a trio consisting of China’s largest online search engine Baidu, the largest e-commerce platform Alibaba, and the dominator of China’s instant messaging service provider Tencent, is dominating China’s internet landscape.

In 2016, since the Chinese economy slowed down in its industrial and manufacturing sectors, the internet industry has gained ground. For example, in 2015, Tencent took charge of two significant mergers. One was of Didi and Kuaidi, the leading taxi hailing apps in China. The other was of 58.com and Ganji.com, the two main classified ad websites. Subsequently, Baidu took charge of the merger of Ctrip and Qunar, the leading travel service sites. Add to this that Alibaba merged Meituan and Dianping, the two largest group buying websites for locally found consumer products and retail services. In short, BAT mapped out a business empire that covers almost all online and offline services ranging from e-commerce to insurance, from banking to health care services.

Meanwhile, this internet empire has possibly been formed thanks to support from the Chinese government. In March 2016, China’s Ministry of Industry and Information Technology issued draft measures that required all internet companies to register their domain names through government-licensed service providers. In particular, the department issued Article 37, which states that ‘For domain names engaging in network access within the borders, but which are not managed by domestic domain name registration service bodies, internet access service providers may not provide network access services’. It meant that foreign websites with domain names registered outside of China, which indeed included a large number of internet companies, would be blocked by the government. This way, the Chinese government tends to padlock its internet market and increase its control over the industry.

Why should we care whether or not BAT expands its business empire in the internet landscape? The first issue is its impact on start-ups. Since 2010, the amount of Chinese start-up companies have doubled in size to 1.6 million, showing the highest growth of start-ups in the world. It is common to find cities in China that are ambitious about being start-up incubators. In order to speed up this start-up boom, both the central government and local governments show their support for start-up policies and funds. For example, the Hangzhou government initiated Dream Town, an internet village with lavish resources for start-ups, including the provision of loans and subsidies. Owing to this substantial support from policies and funds, the term “start-up” has become a popular term on everyone’s lips. But, that being the case, is the market actually ready for this start-up boom? To what extent does the market have space for start-ups, when BAT at the same time is dramatically expanding its business empire?

Baidu identifies its main competitors for its three segments, those being internet search, transaction services, and iQiyi, as Google, Tencent’s search engine SoSo, Tencent’s Meituan-Dianping, Alibaba’s Koubei, Alibaba’s Youku-Tudou and Tencent Video. Tencent’s investee Meituan-Dianping acquired a third-party payment start-up, Qiandai, in 2016, in order to reduce its reliance on the existing mobile payment solutions owned by Alibaba and Tencent, and also to eliminate a possible competitor for Tencent. Therefore, it is not surprising to see that BAT is developing a monopoly capitalist accumulation via investing and acquiring companies in various areas, including by subsuming start-ups. That being the case, BAT will occupy the entire market and leave limited space for start-ups .

A second issue of concern is the young people working in these start-ups that are being bought up by BAT. Numerous training institutes function as incubators for fresh university graduates, who enteri start-ups as low-skilled tech workers. This phenomenon is rooted in the problematic Chinese education system: a vast number of university graduates receive an education of low quality and compete for a limited amount of positions in the high-tech industries, such as the internet content industry that I focus on in my research. This means that training institutes have become a supplement to the education system for university graduates entering the internet content industry. That perhaps does not sound so bad, but the problem here is that most training institutes provide teaching of unguaranteed quality, as the standard of the teaching is not assessed or overseen, and that tuition fees are way too steep for fresh graduates to afford. To attract these young people who are eager to work in the internet content industry whilst unable to afford the fees, some training institutes even brand themselves as offering ‘free courses without tuition’. But we all know there is no such thing as a free lunch: the workers need to pay the institutes bacl loan after finding jobs in the industry, and so ‘free courses’ really means ‘loans’. Institutes offer loans to students by cooperating with loan companies, and students need to pay interests.

An emerging body of work is investigating poor working conditions in high-tech industries. Generally, this emerging research explores issues involving overtime work, poor pay, limited social networks, insecurity, and high competition, and criticises using concepts of exploitation and slavery. The poorly skilled tech workers who have taken courses at training institutes also suffer through poor working conditions, and their stressful working life drives them to be silent cogwheels of the expanding internet content empire.

It is time for us to pay attention to these problems in the expanding BAT empire. My WIAS research project ‘Capital accumulation and exploitation problem in Chinese internet industries’ focuses on these issues, as well as the financialisation process in this industry.